Global Co$.$ purchases one model of a product from a wholesaler and resells it to end consumers. The annual demand for the company$$s product is $50000$ units. The unit ordering cost is $$80$ and the unit holding cost is $$50.$

Required:

The economic order quantity is determined as $2$DOH

Define the different components of the economic order quantity formula. Explain the relationships between the holding cost, the ordering cost and the optimal order quantity.

Compute the optimal order quantity using the economic order quantity model.

Based on the economic order quantity model, calculate the following:

the number of orders

the average inventory

the annual relevant cost of ordering

the annual relevant cost of holding inventories

the total annual relevant cost

Assume that the demand for the company$$s product is seasonal. Would you advise management to adopt the economic order quantity model to plan inventories? Justify your answer.